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Health Insurance as a Productive Factor

71 Pages Posted: 30 Jun 2012 Last revised: 16 Mar 2016

Allan Dizioli

University of Pennsylvania - Department of Economics

Roberto Pinheiro

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Date Written: March 15, 2016

Abstract

In this paper, we present a less-explored channel through which health insurance impacts productivity: by offering health insurance, employers reduce the expected time workers spend out of work in sick days. Using data from the Medical Expenditure Panel Survey (MEPS), we show that a worker with health coverage misses on average 76.54% fewer workdays than uninsured workers, after controlling for endogeneity. We develop a model that embodies this impact of health coverage in productivity. In our model, health insurance reduces the probability that a healthy worker gets sick, missing workdays, and it increases the probability that a sick worker recovers and returns to work. In our model, firms that offer health insurance are larger and pay higher wages in equilibrium, a pattern observed in the data. We calibrated the model using US data for 2004 and show the impact of increases in health costs, as well as of changes in tax benefits of health insurance expenses, on labor force health coverage and productivity.

Keywords: Health, Health Insurance, Labor Productivity, Labor Markets

JEL Classification: E20, E24, E25, E62, I10, J32, J63, J78

Suggested Citation

Dizioli, Allan and Pinheiro, Roberto, Health Insurance as a Productive Factor (March 15, 2016). Labour Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2096415 or http://dx.doi.org/10.2139/ssrn.2096415

Allan Dizioli

University of Pennsylvania - Department of Economics ( email )

160 McNeil Building
3718 Locust Walk
Philadelphia, PA 19104
United States

Roberto Pinheiro (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

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